APPLEBEE'S INTERNATIONAL, INC.
          MEMO OF UNDERSTANDING WITH LARRY A. CATES DATED JUNE 6, 2003



Larry,  you'll find outlined below a summary of the key  information  related to
your retirement. Once you've reviewed, let's discuss, so I can ensure that we've
covered everything and that you and I are in agreement.

The  retirement  provisions  related to benefits  outlined  below were  recently
approved by the  Compensation  Committee.  They will be  implemented  January 1,
2004. They cover officers who have at least 5 years of service and are age 50 or
over at the time they leave the  Company (so long as age and years of service as
an officer added  together are at least 60). Our records show that as of January
1, 2004, you will be 55 with 6 full years of service as an officer,  so you will
be eligible for the program as of your retirement date.

Transition Timeframes and Responsibilities

     o    Your current base salary will be paid through  December 31, 2003.  You
          will then become a part-time  associate  through March 15, 2004, which
          will be your  official  retirement  date.  Your salary for January and
          February  2004 will be $5,000  per month.  Your  salary for March 2004
          will be $2,500. The CEO may assign you various responsibilities during
          the first quarter of 2004 (up to an average of 25 hours per week).  We
          expect that you will be working from home after the end of the year.

Bonus Plan Payout

     o    You will receive a full bonus  (non-prorated)  for 2003, based on your
          evaluated  performance  against your  bonusable  objectives as well as
          actual Company  performance for 2003. You will receive your bonus when
          Support  Center  bonuses are paid,  scheduled  for Friday,  March 5th,
          2004.

Vacation

     o    Because  you will be on  part-time  status as of January 1, 2004,  you
          will not receive a vacation allotment for 2004.





Stock Plan Treatment at Retirement

     o    Because you are on  part-time  status as of January 1, 2004,  you will
          not participate in the standard stock option grant for 2004.

     o    You  currently  own 4,935  shares of  restricted  stock as a result of
          meeting your share  ownership  guidelines.  These shares will have the
          restrictions  lifted as of January 2, 2004,  as provided in your award
          document.

     o    Your other stock option  grants will be treated at your  retirement as
          provided for each in stock award document. Janell Jones will follow up
          with a schedule of your stock option  grants and the exercise  periods
          after  retirement  after  you  and I have  finalized  your  retirement
          provisions.

Benefits at Retirement

     o    You will be able to  continue  coverage  under our group  medical  and
          dental  program at the COBRA rate in effect for each year until age 65
          or  re-employment,  whichever  comes first.  You currently have family
          coverage and the monthly COBRA premium  currently in effect is $760.54
          per month.  Our COBRA  rates will change  effective  March 1st of each
          year.

     o    Your  vision  coverage  (you  currently  have  family  coverage)  will
          terminate  as  of  the  end  of  the  month  following  your  date  of
          retirement.  You can continue your vision  coverage under COBRA for up
          to 18 months,  if you choose.  We will supply you that paperwork prior
          to your retirement date.

     o    Your basic  life  insurance  coverage  and your  short- and  long-term
          disability  coverage will  terminate as of your  retirement  date. You
          will receive the  paperwork to convert  these  coverages to individual
          policies, should you wish, prior to your retirement date.

     o    You will  continue  participating  in the Deferred  Compensation  Plan
          based on your current  elections  through your final check (unless you
          change your elections for your 2004 base salary in the December,  2003
          election  process).  Your bonus you  receive in March 2004 will have a
          deferred  compensation  plan contribution of 25% taken out and sent to
          your deferred  compensation  account. You will also participate in the
          Company  match  (made in the  first  quarter  of  2004,  based on 2003
          contributions).  Your current distribution  elections for the deferred
          compensation plan are as follows:

     o    Your 2000  contributions and earnings will be paid in a lump sum after
          January 1, 2004 and on or before February 15, 2004;

     o    Your 2001  contributions and earnings will be paid in a lump sum after
          January 1, 2009 and on or before February 15, 2009;

     o    Your 2002 and 2003  contributions  and earnings will be paid in a lump
          sum (and the Company  match on your 2003  contributions)  will be paid
          within 30 days after the end of the first quarter, 2004.

     o    Your  contributions  to the ESPP will continue at your current  level,
          unless  you  make a  change  at one of the  quarterly  election  times
          through the end of the year. You will not participate in the ESPP plan
          in first quarter,  2004,  since your  retirement date comes before the
          first quarter stock purchase date.

     o    Your stock for bonus election,  which is to use 25% of your bonus paid
          in 2004 (after the deferred compensation  deduction) to purchase stock
          through the stock for bonus  program,  will be honored for purposes of
          your bonus to be paid in March 2004.

Perquisites

     o    Under the retirement  program to be  implemented  January 1, 2004, you
          will be provided one year of reimbursement for financial/tax  planning
          services after your retirement, up to $1,000.

     o    You will also  continue to have the  opportunity  to have an executive
          physical through our program at St. Luke's each year through age 65 or
          until re-employed, whichever comes first.

     o    You will also be provided  $175 per month in free dining at Applebee's
          through age 65, or re-employment, whichever comes first.

           Non-compete and Non-solicitation Provisions

In return for receiving the proposed  retirement  benefits  outlined above,  you
will be  required  to sign a  document  with  non-compete  and  non-solicitation
provision which continues through age 65.


Larry,  hopefully,  this covers any questions you may have. Once we've agreed on
the provisions of your retirement,  Janell Jones will follow up with you to talk
in more detail about the specifics of the handling of your transition.